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The Pragmatic Dollar

The United States Government could use a healthy dose of pragmatism. Making decisions based on what makes practical common sense instead of what furthers an ideological agenda or what favors a small interest group is what is needed to help our country survive and thrive for the next generation. But Pragmatism requires political will and high-mindedness on the part of politicians and understanding on the part of the voters.

Pragmatism can start small with something as trivial and yet obvious as currency reform. There are two clear sources of waste in our current paper and coin currency system: the continued printing of the dollar bill and the minting of the penny. The dollar bill costs several million dollars per year to print and the bills only last an average of 18 months. They are hard for vending machines to read, especially toward the end of their short lives. Switching to a dollar coin could save millions of dollars per year as coins last 20 years or more. Coins are also easier for vending machines to deal with.

There have been problems in the past with acceptance of dollar coins but acceptance is not a real issue. Dollar coins are less desirable than dollar bills as they are heavier and slightly harder to carry. But the preference of one form of dollar to another is only an issue if both forms are in circulation. If the goal of currency reform is clearly presented as a cost-saving issue, then to stop printing the more expensive form is the desired outcome of the effort. If dollar bills wear out on an 18-month cycle then if we stop printing them now, we have 18 months to make the transition to an all-coin dollar.

In fact, the US is so far behind other nations in reforming its currency that not only should the dollar bill be eliminated, but also the two-dollar bill. In Britain, the smallest note is five pounds, which is worth more than eight dollars. The largest coin is two pounds or more than three dollars. The largest euro coin is worth two euros or about $2.40. So it would make sense to create a two dollar coin as well. Because coins are heavier and less convenient to carry in large number, it’s more important to have closer multiples of value in order to save weight. Living in Britain right now, I know I’d rather carry around a two pound coin than two one-pound coins. If we create a one-dollar coin but no two-dollar coin, then there will be a huge demand for two-dollar bills that will lessen the savings of the program.

Politicians have been reluctant to make the pragmatic change for several reasons. One is the need for currency reform is caused by inflation, which politicians are loath to admit exists. A second reason is that, I have heard, the companies that supply the [cloth blanks?] for “paper” money obviously have a strong interest in keeping their market, so they lobby for continued printing of the dollar bill. By far the most circulated bill is the dollar bill, so eliminating the dollar (and perhaps the two dollar) would eliminate perhaps half the market for cloth blanks.